International Human Resource Management

1. International Human Resource Management The Quality of the People is the only Source of Competitive Advantage

2. International Differences Affecting Labor Relations • Cultural Factors • Power Distances • Individualism vs. Collectivism • Masculine vs. Feminine • Uncertainty Avoidance • Short vs. Long-Term Orientation • Economic Factors • Capitalism: emphasizes productivity; efficiency • Socialism: emphasizes low unemployment • Labor Cost Factors • Higher labor costs mean a focus on efficiency • Industrial Relations Factors • Strong vs. Weak labor unions

3. International Human Resources Management • Staffing Philosophy • Management Selection Criteria • Performance Appraisal • Overseas Training Programs • Compensation

4. Staffing Philosophies for International Enterprises • The Ethnocentric Approach • The Polycentric Approach • The Regiocentric Approach • The Geocentric Approach

5. Ethnocentric Staffing Policies (1) • Uses parent-company nationals to staff management positions in overseas subsidiaries • Advantages • Easy to get people with detailed knowledge of company policies and culture • Expatriates have detailed knowledge of parent companies’ technology and product development. • Parent company has a good deal of knowledge of expatriates’ managerial ability. • No problem with loyalty to company

6. Ethnocentric Staffing Policies (2) • Disadvantages • Unfamiliarity with many host country political, legal, and economic issues • Difficulty of adapting to new culture • Difficulty with intercultural communication • Very expensive for the parent company (high salary and benefits needed to attract people + relocation expenses) • The most qualified people may not want to go overseas

7. Ethnocentric Staffing Policies (3) • Evidence of high failure rate of expatriate managers • Cost of failure = 3X annual salary + relocation costs ($250,000 - $1,000,000) • Reasons for failure • Inability of spouse to adjust • Inability of manager to adjust • Other family problems • Manager’s emotional immaturity • Inability to cope with larger responsibility • Lack of technical competence

8. Polycentric Staffing Policies (1) • Appointing host country nationals in middle and lower management ranks in overseas subsidiaries • Used by many firms, such as DuPont, Shell, and Qantas • Advantages • Familiarity with local language, culture, customs, economy, business conditions, and legal requirements • Less expensive than relocating expatriates

9. Polycentric Staffing Policies (2) • Disadvantages • Difficulty of coordinating activities and goals between the parent and subsidiary • Loyalty may be to the host country and not to the company • Difficulty in communicating with the home office and with other employees • May be unable or unwilling to relocate • May lack understanding of the home office’s corporate culture

10. Regiocentric Staffing Policies • Handles global markets regionally • Staffing for a region (for example, Europe or North America) is handled regionally. • Used when product sold globally is the same, but marketing must be tailored to the tastes of different cultures

11. Geocentric Staffing Policies • Favors the appointment of managers with the best qualifications, regardless of nationality or ethnic background • Used by Coca-Cola

12. Management Selection Criteria for International Positions (1) • Technical ability • Ability to do the job • Managerial Ability • Based on previous track record • Cross-Cultural Sensitivity • Tolerance, openness, and understanding of other cultures • Adaptability and Flexibility • High degree of ability to integrate with other cultures • Ability to change • Ability to solve problems in a changing environment • Ability to manage an operation on a continuous basis, despite a lack of information or assistance

13. Management Selection Criteria for International Positions (2) • Diplomatic Skills • Ability to discuss issues and negotiate with the host country’s government • Foreign Language Aptitude • Ability to learn foreign languages quickly • Positive Attitude • Emotional Stability and Maturity • Adaptability of Family

14. Performance Appraisal (1) • Purpose • Providing feedback to individuals as to how well they are doing • Providing a basis for rewarding top performers • Identifying areas in which additional training and development may be needed • Identifying problem areas that may call for a change in assignment

15. Performance Appraisal (2) • International performance evaluations need to be carefully designed to avoid biases toward one cultural frame of reference. • Should be a combination of the following • Hard Goals: quantifiable (example: market share) • Soft Goals: relationship-based, such as leadership style • Contextual Goals: situational

16. Performance Appraisal (3) • Other ways to improve the expatriate appraisal process • State the assignments difficulty level • Weigh the evaluation more toward the on-site manager’s appraisal • Modify the normal performance evaluation to fit the overseas position

17. Overseas Training Programs • Environmental briefings • Geography • Climate • Housing • Schools • Cultural Orientation • Cultural Institutions • Value Systems • Cultural Assimilators • Programmed learning techniques geared to provide the participants with intercultural interactions • Language Training • Sensitivity Training • Develop flexibility • Field Experience • Real overseas experience

18. International Compensation (1) • The strategic purpose of any compensation system is to attract, motivate, reward, and retain competent staff. • An appropriately designed compensation system is essential to enable a firm to appoint staff who will work toward the organization’s goals.

19. International Compensation (2) • Pay a similar base salary company-wide. • Add various allowances according to individual market conditions. • Have local managers conduct compensation surveys in their countries • Most Common Approach is to equalize purchasing power across countries. Thus expatriates enjoy the same standard of living. Companies focus on expenses: • Taxes • Housing • Goods and Services • Cash Reserve

20. International Compensation (3) • Common Allowances • Cost of living allowance for housing and consumer goods price differentials • Tax equalization adjustment • Children’s education expenses • Periodic family home leaves • Differential for inflation and currency depreciation • Hardship bonuses for working abroad • Relocation expenses • Overseas premium (10% to 25% of salary)

21. International Compensation (4) • Common Perks (Benefits) • Company car (and possibly driver) • Private pension plan • Life insurance • Health insurance • Company house or apartment • Holiday travel • Club membership • Hidden expense fund (illegal)